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Markets brace for reports on China's economy

China, which roiled global markets early today after signaling another move to tighten bank lending, will be center stage again tonight with a slew of economic data.

The question is whether the numbers will be so strong that the government will feel compelled to take additional steps to brake the economy and deflate potential asset bubbles.

With the sustainability of the global economic recovery still in doubt, a marked slowdown in China would be unwelcome in much of the world -- and particularly to suppliers of raw materials and other commodities.

China’s fourth-quarter gross domestic product, one of the numbers to be reported this evening (L.A. time), is expected to show 10.5% growth compared with a year earlier, according to a Bloomberg News survey of economists.

China’s Shanghai stock index slumped 2.9% on Wednesday, European blue-chip shares dropped 1.5%, on average, and the Dow Jones industrial average lost 1.1%.

Because China’s financial system still operates largely independently of the global financial system, tighter credit in China can’t ripple through world interest rates the way that a credit-tightening move by the Federal Reserve would, notes Alan Ruskin, chief currency strategist at RBS Securities.

Still, he said, “China does punch like a heavyweight when it comes to real-economy trade linkages, notably commodities.”

Hurt in part by China’s banking moves, commodity prices overall have been under pressure for the last 10 days. The Reuters/Jefferies CRB index of 19 major commodities hit a 52-week high on Jan. 6 and is down 4.8% since then, including Wednesday’s 1.3% decline.